BY
Gary Noakes

CFO: cheap oil wasn’t source of Norwegian’s success

Norwegian’s low-cost long-haul business model does not simply rely on cheap oil, its finance boss has insisted.

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"The same person that flies business to New York flies in economy when travelling with their family"

Speaking at Aviation Festival in London, Tore Ostby, the airline’s chief financial officer, said this was “absolutely not” the case. “We decided to launch [long-haul] when oil was above $100 [per barrel],” he revealed.

Ostby was appointed to the role in July, after his longstanding predecessor – Frode Foss – left the company. In mid-July, the carrier, which was one of the first to bring low-cost long-haul to the UK, reported a first-half net loss of £40.9 million after rapid expansion, especially at Gatwick.

The figure prompted Ryanair boss Michael O’Leary to claim that the airline “will go in four or five months”, a statement that Norwegian said had “no root in reality”.

Ostby told the conference that fuel costs were not an obstacle: “We regard the airline industry as a growth industry,” he said, but admitted that any rise in fuel prices would “probably slow the growth”.

Ostby and Virgin Atlantic chief executive Craig Kreeger agreed that both airlines were chasing the same passengers. “I don’t see that they are different customers,” said Kreeger. “The same person that flies business to New York flies in economy when travelling with their family. I have never seen them as different markets.”

Kreeger said Virgin Atlantic could compete with the likes of Norwegian. “We have a proposition that we think is good value, a combination of low fares and a service proposition that brings [customers] back. We can still be Virgin Atlantic and still compete.”

He said the airline had “seen an opportunity” in the regions, launching flights from Manchester to Boston, San Francisco and New York this year. Capacity at Glasgow and Belfast would be increased by 20% next year, he said.